Post navigation

End of week report: Gold’s Move Tied To Central Bank Action?

Quantitative easing (QE) from either the European Central Bank (ECB) or the Fed seems to be the key factor in a rally for the price of Gold. Should either central bank announce a round of QE, prices are likely to increase due to the results of such action all being supportive of the Gold price. Investors shouldn’t be surprised to see action from Europe before the U.S., however. London’s Marex Spectron said in a note, “The eurozone appears to continue to struggle, while the U.S. keeps surprising the market with positive figures. This only enhances the chance the ECB is more likely to act before the Fed.” The upward push on Gold is being kept in check somewhat by the mixed United States economic data that suggests the U.S. Federal Reserve will continue its “wait and see” attitude. The Jackson Hole meeting at the end of this month could bring into focus what central banks are planning to do. “After Jackson Hole, the markets will hopefully have a better idea,” said Afshin Nabavi, head of trading at MKS Finance. “Until then, we should continue trading within this range.” A lack of liquidity over the quiet summer months was preventing Gold from moving higher, he said.

Weakening Rupee Hurts Demand:

Physical demand for Gold is taking a hit in India now. That country has been the world’s largest consumer of Gold, in large part due to its high demand for use in jewelry. The two factors that are playing into the softening demand are an increase in import duties and a weak Indian rupee, which drives the local price of Gold higher. Combined with a stronger dollar and weaker euro, the rest of the world is seeing the Gold price hover around $1,600 per ounce. With currency trade on one end and the desire for a safe haven investment on the other, Gold seems to be tugged by both sides at the moment, waiting for a potential announcement on QE from either the United States Federal Reserve or the European Central Bank. India’s festival season has begun and will peak in November. This is a time for weddings and giving Gold gifts.

Mine Violence Sparks Platinum Prices:

Platinum prices have spiked Thursday as a bloody conflict between South African police and striking miners at Lonmin’s Marikana Platinum mine resulted in many injuries and an unconfirmed number of fatalities. The police moved to disperse the estimated 3,000 miners by force after talks broke down with the Association of Mineworkers and Construction Union. Today’s violence caps off a week of fighting that has already seen ten deaths, two of which were police. Lonmin said it had lost the equivalent of 15,000 ounces of Platinum from the six-day disruption, and was unlikely to meet its full-year production target of 750,000 ounces. Friday saw the confrontation between police and South African miners at Lonmin PLC has escalating, causing Platinum to rise drastically for the second straight day. South Africa produces 75 percent of the world’s Platinum, and concern over its output could spur further gains.